Understanding the Different Types of Lending Solutions Available
Today, around 51% of Americans have credit card debt. We’re a very credit-based society, seeing as the majority of people can’t save up enough to make large but life-changing purchases. So it’s normal to not only have credit cards, but also big amounts of debt.
Credit cards aren’t your only solution when you need money though. With so many lending options available, it’s worth exploring which work best for you.
So what are your choices for loans? Read on for some ideal lending solutions you can turn to.
Personal Loans
Personal loans are ones you can use for any reason. Many Americans take these out to pay for medical bills, weddings, emergencies, or even debt consolidation.
There are two types available: secured and unsecured. Secured loans will have lower interest rates since the lender doesn’t have to take on additional risks. This is because the loan is backed by collateral from the borrower.
On the other hand, unsecured loans have higher interest rates. However, if you’re not comfortable putting up collateral, or don’t have anything to offer, this might be your only choice.
Business Loans
As the name suggests, these are business lending solutions where you must use the money on your company. For example, you can finance the start of your business and purchase inventory to start things off. Or if you’ve already established it, you can use the loan to expand your operations instead.
Within this category, there are several loans available, including:
- Term loans
- Lines of credit
- Equipment financing
- Invoice financing
- Small Business Administration (SBA) loans
Payday Loans
Generally, it’s not recommended that you get payday loans. This is because they come with such high interest rates that many people end up in a serious spiral of debt.
However, payday loans work in a pinch if you have an emergency and need cash fast. Your loan is backed by your next paycheck, so you must be employed to get this money.
Payday loans should be a last resort, and if you do take one out, make sure you pay it back ASAP.
Mortgage Loans
If you’re ready to buy a house, then you’ll probably need a mortgage. These loans are considered secured loans, as the property you purchase is the collateral.
The types of mortgages include:
- Fixed-rate
- Adjustable-rate
- Federal Housing Administration (FHA) loans
- VA loans
- Jumbo loans
Do note that you’ll usually need to put down a down payment, which can be anywhere between 3% to 20% of your home’s purchase price.
If you’re not sure what you should get, then working with a mortgage broker is a good idea. They’ll get you the best deals around.
Explore These Lending Solutions
As you can see, there are many lending solutions available besides credit cards. Whether it’s personal, business, payday, or mortgage loans, there’s a specific path you can take to make life a little easier.
While it can be nerve-wracking to take on debt, sometimes it’s necessary to get ahead. And so long as you’re responsible and make payments on time, you’ll be building credit and improving your future.
For more financial help, keep reading our blog page.
